The role of foreign exchange_International Exchange Practice

1.As a pricing method and payment tool for international settlement, facilitating international settlement is the clearance of economic and trade transactions, creditor's rights and debts of different countries in the world. Due to the different monetary systems of each country, the domestic currency cannot become an international payment method, onlyforeign exchangeThis type of credit tool is necessary to ensure smooth settlement.
2.International exchange can achieve the international transfer of purchasing power, making it possible for currency circulation between countries. Due to the different monetary systems of each country, their currencies cannot circulate in other countries, except for the use of internationally recognized settlement methods——goldBesides, the purchasing power of different countries cannot be transferred. With the development of foreign exchange business, foreign exchange has been widely accepted by countries as an international payment method, making it an international purchasing power. A country holds foreign exchange, which means it has a certain amount of international purchasing power, and can use the foreign exchange it holds to purchase various goods and services needed in the international market, as well as to pay off foreign debts. Converting the purchasing power of one country into that of another provides the possibility for international exchange of goods and expands the scope of circulation.
3.Promoting the development of international trade through foreign exchange settlement not only saves transportation cash costs but also avoids risks. Especially through the use of various credit tools in international trade, it has promoted the development of international commodity exchange and expanded international trade.

4.Facilitating the adjustment of international capital supply and demand plays a role in regulating capital surplus and shortage. The uneven economic development of countries around the world, different situations of capital surplus and shortage, and different manifestations of capital supply and demand contradictions objectively require the adjustment of capital surplus and shortage. Developed countries have an excess of funds, while developing countries have a shortage of funds. Foreign exchange can accelerate the circulation of funds internationally, facilitate international investment and capital transfer, and regulate the supply and demand of international funds.
5.As an international reserve, it plays a role in balancing the international balance of payments. If a country experiences a deficit in its international balance of payments, it can use foreign exchange reserves to make up for it. A country with a large foreign exchange reserve has strong international solvency. In today's international economic activities, no country directly uses gold to repay debts, make up for international balance of payments deficits and foreign exchange shortages. Instead, they sell their gold holdings at market prices in the international market and use the exchanged foreign exchange for repayment.

6.As an international payment method, gold and silver play a role in saving circulation costs and compensating for the lack of circulation means, which is a waste of human labor and precious resources. As an international payment method, foreign exchange can be used to clear debts and transfer funds internationally through various negotiable instruments represented in convertible currencies, such as telegraphic transfer, mail transfer, or bill of exchange, thereby saving circulation costs. At the same time, various parties in international trade obtain convenient financial financing by buying and selling bills of exchange in different currencies and payment times through banks. After endorsement, the forward acceptance bill has the function of circulation and transfer in the international financial market, making foreign exchange a payment method to compensate for the shortcomings of circulation.